Concerns Within Lower Unemployment Rate

The U.S. unemployment rate tumbled to 7.7% in February but a broader rate that includes discouraged workers fell by a smaller amount to 14.3%.

The drop in the main unemployment rate was driven mostly by positive factors. The unemployment rate is based on the number of unemployed — people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The unemployment rate is calculated by dividing the number of unemployed by the total number of people in the labor force.

The number of people who say they are working increased by 170,000, solid increase from the prior month. Meanwhile, the number of people counted as unemployed tumbled by an even larger 300,000. That sparks some concern. It means that all of those unemployed didn’t find jobs. Many of them are likely retirees or people who leave the labor force to go to school. But there also are large numbers of discouraged workers dropping out of the labor force. The number of discouraged workers jumped in February.

The issue can be seen in the smaller drop in the broader unemployment rate, known as the “U-6″ for its data classification by the Labor Department. That includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

In February, the rate only ticked down 0.1 percentage point as the number of part-time workers who would like full-time jobs increased and the ranks of those marginally attached to the labor force climbed.

The disparity highlights the plight of the long-term unemployed, whose ranks increased in February even as those without a job for a shorter time had an easier time finding a new position. The longer someone is out of a job, the harder it is for them to find work.

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